Britain's financial watchdog fined Deutsche Bank today for acting against a customer's interests and warned the London market to play straight with investors.
The Financial Services Authority (FSA) fined Morgan Grenfell & Co, a unit of the German bank, £190,000 sterling for "failing to act in a customer's best interests" in carrying out a £65 million order to buy shares.
Deutsche officials were not immediately available for comment.
The FSA said Morgan Grenfell, aware of the shares the client intended to buy up, had traded some of the same stocks on its own account before going on to carry out the customer's order, resulting in the client paying a higher price for the trade.
"By pre-hedging the programme trade, Morgan Grenfell ultimately disadvantaged its customer, a fund manager, in the price they paid for the trade, and the underlying investors in the relevant funds," the FSA's head of enforcement, Mr Andrew Procter, said in a statement.
It is not uncommon for brokers, when carrying out large complex trades known as programme trades, to hedge their possible losses by taking a position in the same stocks.
But the FSA said Morgan Grenfell had failed to tell the client that this is what it planned to do.